Banks Are More Asset Sensitive Now Than 2005: Sterne Agee

Aided by core deposits and absolute level of interest rates, banks are more asset sensitive now than they were during the 2004-2006 interest rate hike cycle, notes Sterne Agee.

Brett Rabatin and Jonathan Craycraft of Sterne Agee in their research report dated October 7, 2014 titled: “Asset Sensitivity-A Look Back at History, and Some Concerns We Have With 10-Q Modeling” express their concern that deposit costs may not lag interest rates as much as banks hope.

Interest movement Vs NII

After analyzing the interest rate cycle during 2004 to 2006, the Sterne Agee analysts note that NIM for banks between $5 billion and $20 billion actually declined 20 bp on average during the last cycle. The analysts believe banks are more interest...